EU trade outlook alarms Africa’s banana exporters

The banana sector in West Africa exports mainly to Europe and is a mainstay of several countries’ economies | Steve Jordan/AFP via Getty Images

August 14, 2018

Courtesy: Politico

African banana growers fear that Brexit and Brussels’ pursuit of trade deals across Latin America will deal a knock-out blow to their businesses.

As Europe tries to draw lessons from its migration crisis and bolster relations with African governments, African farm leaders are warning Brussels not to undermine the region’s economic stability by turning a blind eye to the dangers of job losses in the banana business.

“Europe must not fall into the trap of double talk, in saying publicly that it wants Africa as a long-term strategic partner on the one hand; but on the other: endangering the development of our agricultural sector,” Cameroon’s banana lobby ASSOBACAM said.

“That risks the destabilization of our rural regions, the disappearance of thousands of jobs and the creation of vast pockets of poverty and migration,” it added.

The European Commission’s trade deals with Latin America’s banana powerhouses, from Nicaragua to Ecuador, have seen transatlantic imports into Europe soar over recent years.

“If they lose that banana trade, then another 80,000 people will be out of a job” — Paul Goodison, agricultural trade analyst, on African producers

Brexit is also a concern: The U.K. accounts for 20 percent of the EU banana market and African producers worry London will prioritize cheaper American bananas after quitting the bloc.

As if that weren’t enough to worry about, Brussels is also keen to ink a landmark trade deal with the Mercosur trading bloc in the near future. Brazil, Mercosur’s dominant economy, is a leading banana producer.

“Whether Brazil will be able to expand exports to Europe … that’s the nail in the coffin,” said agricultural trade analyst Paul Goodison. “It’s a real, real issue.”

“If they lose that banana trade, then another 80,000 people will be out of a job,” he added, referring to African producers.

Colombia is a major supplier of bananas to Europe | Raul Arboleda/AFP via Getty Images

Bananas in European supermarkets come mostly from major South American exporters such as Ecuador and Colombia. But the banana sector in smaller African producers such as Ghana, Ivory Coast and Cameroon relies almost entirely on European trade, and is a mainstay of their fragile economies. Bananas are one of the top exports in oil and timber-producing Cameroon, for example.

These countries, through their historic links with Europe, can export as much as they like into the EU tariff free. Growers there are now afraid, however, that a changing global trade dynamic will weaken their ties to the European market and destroy tens of thousands of jobs.

A Commission official insisted Brussels ensured that trade agreements with Latin American countries did not threaten Africa’s banana industry, pointing to so-called stabilization mechanisms that allow for raising import tariffs if banana imports grow too large.

“Our concessions to Latin American countries will not come at their expense,” the official said, referring to African producers.

Brussels has never activated the mechanisms, however, and African producers protest that they are more rhetoric than reality.

Dollar dominance

Europe’s banana relations with African, Caribbean and Pacific (ACP) states have a long and sensitive history.

Latin American countries and the U.S. waged a 15-year long trade war against the EU for its policy of favoring ACP countries. Chiquita, which was U.S.-owned until2015, is one of the largest banana companies operating in Latin America. On the other side, the largest banana companies in Africa are European-owned, such as France’s Compagnie Fruitière.

In 2009, the EU conceded and slashed banana tariffs from €176 per metric ton to €114 per metric ton, and also donated €200 million to help ACP producers modernize. The then Development Commissioner Karel De Gucht said: “I know ACP producers will face challenges in adjusting to the new situation. But the EU will do its best to help.”

A larger fear again, is that Brexit will mean that the U.K. kicks its former colonial banana suppliers into the dust.

The ink on that deal was hardly dry when Brussels worried African producers further by signing trade deals with some of the world’s largest banana exporters. The Commission brokered a deal with six Central American countries in 2012, for example, then with Colombia and Peru in 2013 — and finally with Ecuador in 2017. These deals allow the tariff to gradually decrease to €75 per metric ton in 2020.

Ecuador — the world’s largest banana exporter — is already racing ahead. Its EU exports jumped 13.5 percent between 2016 and 2017, to about 1.5 million metric tons. This growth also shows little sign of slowing: It had already shipped some 438,000 metric tons by the end of March this year, according to Commission statistics.

By contrast, African bananas are a drop in the ocean. Ivory Coast exported some 315,000 metric tons of bananas to the EU in 2017, while Cameroon exported some 270,000 tons and Ghana just 70,000 tons.

“It’s a very, very difficult position they’re in,” said Goodison, the trade analyst, explaining that African exporters are feeling the heat now that the South and Central Americans have better access.

The prospect of a similar banana tariff-slashing deal with Brazil, through an EU-Mercosur agreement, is sparking concern. Most of the country’s production is for domestic consumption, but many fear a long-term threat to African industry. Ivory Coast’s banana lobby, OBAM-CI, told POLITICO, for example, that “nothing would stop [Brazil] making the necessary investments in the future.”

African banana growers established lobby group Afruibana in 2017 in an effort to get Brussels to heed their demands, which include measures to slow booming Latin American imports using the stabilization mechanisms. Brussels sets a threshold for banana imports from a country in its trade deals. If these are surpassed, it examines the market and decides whether to raise the tariff.

A boy carries bananas in Nicaragua. Banana exports from the Central American country have rocketed | Hector Retamal/AFP via Getty Images

But the Africans are increasingly worried that Brussels will never use the tool.

Ghanaian MP Ben Abdallah Banda asked Development Commissioner Neven Mimica why the stabilization mechanism has never been invoked at a meeting in December in Port-au-Prince. Afruibana said the commissioner “remained rather evasive.”

Cameroonian banana lobby ASSOBACAM also questioned the Commission’s intention to use the tool, pointing out that Brussels hasn’t used it since the deals with Honduras, Nicaragua and Panama, and Colombia and Peru, came into force in 2013. It added that Brussels’ reasoning for not using the tool was opaque, and seemingly made “according to different methodology each time.”

The case of Nicaragua’s exploding exports has raised eyebrows. The threshold stands at 14,000 metric tons, but Nicaragua has already exported some 37,666 metric tons this year, according to Commission statistics from July. In June, the Commission declined to invoke the stabilization mechanism, citing minimal impact on Europe’s banana market.

Brexit’s bananas

A larger fear again, is that Brexit will mean that the U.K. kicks its former colonial banana suppliers into the dust.

Britons eat a massive 1.1 million metric tons of bananas a year, Afruibana said, which accounts for about 20 percent of the EU market. London could decide to ink deals under different terms with Latin American producers after it leaves the bloc, for example.

However, there’s also an ongoing discussion about how the EU and the U.K. should divide food import quotas after Brexit, where the concern is that EU deals with banana powers, which are designed with the huge British market in mind, would simply transfer to the remaining 27 EU countries. This would increase supply and ramp up competition for already stretched African producers on the EU market.

Huub van den Broek, the managing director of Ghanaian banana firm Volta River Estates, said that 90 percent of his produce goes to the U.K. and that Brexit is a worry. He added that he hoped Ghana would receive preferential treatment since it’s in the Commonwealth. Ghana is particularly affected: It exports over 50 percent of its bananas to Britain, according to Afruibana.

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Intercultural Resources is a Centre for Research, Documentation & Intervention on issues related to the impacts and alternatives to destructive development. Social Movements and People’s Struggles are the two main areas of research and documentation ICR is engaged in. It is based in Delhi, India. Email: icrindia2016@gmail.com